Tag Archive for 'Business Strategy'

Is your business paying you more than just a wage?

Does running your own business payoff? The answer is yes, and no.

In a recent BRW Magazine article, University Of Western Sydney researchers revealed that even though small business owners still don’t earn as much as the typical wage earner, they’re becoming richer and smarter with their money as they tend to accumulate more assets.

Australian business owners report a lower level of weekly income. In 2010, they took home an average weekly income of $1975 compared with those on a wage who took home $2173.

But a new University of Western ­Sydney study shows business owners outstripped their more secure counterparts by accumulating assets worth more than $1 million ($1.095 million in 2010), whereas wage earners ­accumulated only two-thirds ($673,000) of this amount.

“As a small business owner, you sometimes sacrifice some income in favour of reinvesting that,” Mark ­Sargent from Newcastle University said. “There’s evidence the typical model, where you take the risk and get greater returns, actually is the case.”

Using data from the Australian Bureau of Statistics and HILDA (Household, Income and Labour Dynamics in Australia), the study  found there are more than 2.1 million owner-operators of small businesses in ­Australia and the proportion of superannuation investment by both wage earners and small business owners has increased markedly.

The value of superannuation holdings in the sample group shows contributions from salary and wage earnings households between 2003 and 2010 rose 60 per cent whereas the contributions from unincorporated small businesses nearly doubled to 112 per cent.

“The magnitude of the change was quite surprising,” Dr Sargent said.

“Traditionally, people have started their own businesses with a view of one day selling their business and using the proceeds to fund their retirement.

“What we have now begun to detect is that more business people are ­dramatically building up their superannuation funds. This is a far more ­protected and secure environment for wealth creation.”

This is both good and bad news for small business owners.

First the good news: At least business owners are rewarded with capital appreciation of their assets. It is assumed the capital growth difference with their salaried peers actually compensates for the lower income and would the greater access to business deductions.

The bad news: The risk borne by small business owners is usually very high, with many primary residences collateralised for business bank loans and the on-going risk of default and bankruptcy especially in times of economic and geopolitical turmoil. An employee might lose a job, a business owner his/her job AND his/her house!

The great news: Some small business owners succeed at making a higher income and create greater capital appreciation than their peers. This small, elite group of business owners learns powerful strategies that are tried and tested. If you would like to join them, contact us. We’ll let you know if you qualify to join them.

Business and intuition

We have all had them – premonitions, gut feelings, the sense that something will happen before it does, knowing something we shouldn’t well before it seems logical or sensing something happening to someone close to you that is physically far from us…

Gut feelings… a sixth sense… by whatever name, intuitions can be informative. Many swear by them.

But in the investment world, mysteriously-generated feelings more often than not lead investors to make wealth-destroying decisions. In the business arena, the same is true – very capable, smart, hard working people travel down the wrong path with often devastating consequences. Working harder and harder based on a hunch or “opinion”.

There is a better way…

Nate Silver, statistics guru extraordinaire, put a face on the value of data and — when astutely analyzed — its ability to guide decision-makers toward the most desirable outcome. His CNN blog was widely followed during the 2012 American presidential election, because his statistical models proved more accurate than anyone else’s.

A year earlier, the Hollywood hit, Moneyball (originally published as a book), introduced the world to a unique idea: A data-driven, decision-making model can successfully overcome a lack of financial resources… allowing a stats-geek baseball recruiter to beat out deep-pocketed rivals who continued to rely on subjective intuition and gut feel.

When you look back, the writing’s been on the wall for years.
But very few want to read it.

The availability of troves of data — and the computer power needed to process it — has increased substantially over the last decade.

Yet, to some, the Big Data trend is scary.

The National Security Administration (NSA) spooked the world when Edward Snowden revealed the agency’s collection of massive quantities of our personal data. (Scary!)

Target stores reportedly have the ability to predict when a woman is pregnant — based on her spending patterns — even before she knew she was! (Scarier!)

And Twitter has analyzed billions of data points to determine which days of the week, and months of the year, we’re more likely to be happy. (Odd!) Here’s a graphic showing the analysis:

Twitter - Happy Day Of Week

Twitter, Target, and the NSA aside, financial markets are chock-full of data and, therefore, the ultimate playground for investors with a bent toward quantitative analysis. They even have their own nickname – quants!

If you’ve read my blogs for any length of time, you know I ONLY make decisions when my metrics show I have an edge…

I call it Management By Metrics.

Even though I am a fan of the power of the human spirit and readily admit that running a business is a balance of art and science, I NEVER make any major business (or investment) decision based on a gut feel. I am risk averse – why take a risk when you can reduce or eliminate it with some very simple, basic math?

I realise my pure and applied science and engineering background has influenced me. I spent several years immersed in the scientific method, which involves making observations about the real world, forming hypotheses (educated guesses) as to why the observations are what they are, and designing experiments to determine whether or not the hypothesis holds true.

Surprisingly, very few people in business use this method. Anecdotally I think it’s the popular aversion to mathematics as much as it is mental laziness. I am not suggesting you need to learn multivariate statistics, but just the use of Excel and a few simple formulas can take the guesswork out of most business decisions.

As The Exponential Growth Strategist, I facilitate our Platinum Program where you can learn the skills to acquire what I call 20/20 Foresight – being able to predict the future or manifest the future you seek for yourself or your business. Founded on scientific principles, it is with reach of anyone with a basic understanding of math and a hand-held calculator.

The science is straight forward and simple – the repercussions for you and your business can be, well…. astounding.

Contact us if you want to get past your hunches and gut feeling decisions that are letting you down or keeping you up at night with worry.

One thing that is crystal clear and most “experts” agree – the volatility and uncertainty we are currently facing is NOT going away anytime soon and in fact many agree it will get a lot worse before it gets better. It is the ‘new’ way of the world, well documented and well understood. We are in a cycle that will continue to play itself out in very predictable ways – well predictable for those who know what I am talking about!

Give us a call and we’ll introduce you to very exciting and valuable concepts like this one, that will put you back in the driver’s seat of your business (and your life) so you can steer in the direction of your goals and dreams and get to your ultimate destination (achieve your ultimate outcome).

Why business is getting harder

First, I want to apologise because this blog post is quite long – but necessarily so. It’s an excerpt of an email I received from a US-based financial “advisory” firm. The story is so well told – I have chosen to make only minor edits, so bear with me and the story for the priceless lesson it provides you as a business owner-manager.

I finished high school in a small town back in the swamp in southern Louisiana. We had 89 people in our graduating class, and the entire school had less than 400 students.

While we missed a lot of things because of the size of the school, there were some positives.

For one, athletes got to play several sports. In fact, my best friend was a four-sport letterman. He was fast, strong, and smart, so he was a free safety in football, point guard in basketball, 2nd baseman in baseball, and a sprinter on the track team.

Now, he is simply a relic…

The government has made his achievements almost obsolete. It’s nearly impossible for kids to pursue more than one sport today and still make a high-school team… because it’s all about the money.

Scholarship money, that is… and Division 1 in particular.

My friend’s achievements come back to me as I sit in the stands and watch my daughter play volleyball. She’s not playing on a school team this time of year, because volleyball season is over. Instead, we’re at a private facility where we pay too much for her to pursue this sport outside of her school. This is the world of “travel ball.”

Like most players, our daughter tried out for more than one organization, which then ranks the players. Then some of the players are offered a spot on a team at different levels (open, regional, state, local), representing where the team will compete.

Once on a team, players practice three times a week and play in six to 10 tournaments over the course of four months. There are also optional mini-camps… but keep in mind, in sports, practice is never optional, no matter what the coach says.

When the travel season ends, it will be summer, when the girls are expected to attend at least one three-day and one week-long ball camp, and there are other “optional” opportunities to play and practice as well.

Once school starts, the girls will try out for their respective school teams during the regular fall season. In October and November, travel-ball tryouts occur and the cycle starts all over again.

This process exists for baseball, volleyball, lacrosse, and probably every other sport.

Families spend thousands of dollars every year to pay for their spot on a team, for travel to tournaments (which can be across the country), for gear, and for camps. The costs easily can reach $6,000 per year.

While some players truly do it for the love of the game, there’s a different motivation for most. It’s all about Division 1.

Parents and players have a laser-like focus on making it to the big-time: scoring a Division-1 college scholarship to top level schools, like Duke University and University of Southern Carolina.  

Everything about their pursuit of a single sport centers on the possibility of being selected to play at a great college, thereby obtaining a “free” degree.

With the cost of college outrageously high, sports scholarships are one way for kids to be able to attend pricey schools. So families do what they can to bolster their kids’ chances. The kids play all year (school and travel ball)… they go to camps… they go to all of the practices. And they focus on only one sport in order to master the skills necessary to get selected.

The years of multiple-sport lettermen are over… thanks to a larger force that’s driving everything.

It’s the force that has driven college costs outrageously high, bringing us to the point where it’s impossible for a median-income family of four to afford it.

I hope we’ll find a way to reduce the price of college, and thereby relieve some of the pressure on high-school athletes who are trying so hard to get scholarships at the expense of pursuing, or even trying, other interests.

Here is the lesson for business owners:

Every single industry has gone through a transformation like the one that has afflicted (hopeful) US college students… It is getting harder and harder to compete because successful companies have specialised with laser-like focus out of necessity, to stay in the game so-to-speak.

So what can you do to counter-act this?

You need a DIFFERENT approach, to get DIFFERENT results.

Ignoring what has changed will not make it go away any more than a US student who doesn’t pick his or her sport in middle school or at the very least at the beginning of high school. Otherwise, it’s “game over”.

That’s today’s lesson – if you THOUGHT the game of business had changed – it has and continues to change at an alarming rate.

We offer business coaching and mentoring services to help you stay “ahead of the curve” and leverage these changes to your advantage rather than becoming victim to them.

Contact us when you’re ready.

 

Not everyone should be a champion

For the past few weeks, I have been blogging and emailing about Champion Mindset strategies applied to business and then it hit me – not everyone should be a champion.

I don’t say this frivolously, I’m totally serious.

Not everyone should be a champion.

  • Champions want opponents who push them to become the best they can be, but also that come up short in the key moments so they get all the spoils of victory to themselves.
  • Champions also need competitors who are easy to beat, who give them time and the opportunity to hone their skills without pressure and intimidation.
  • Champions also appreciate supporters of the sport who are in it just to have fun and give it a go, it creates ambience and a great family, group atmosphere.
  • Of course we can’t forget the spectators – without them, what would be the point of being a Champion? Champions need, even crave and feed off the admiration, respect and adoration that fans enthusiastically show for their favorite “superstar”.

A few years ago, I chose to work with business people who wanted and were committed to being Champions of business, but I accept that it’s not for everyone.

 Winning - Willpower

In business I see the non-champions every day:

  • The person who complains about clients who didn’t pay their bills on time or that their employees are slacking off.
  • The entrepreneur who works ridiculous hours for a wage they would never accept as an employee.
  • The long-time business owner-operator who thinks he/she is building a business yet there is no chance whatsoever that anyone will ever buy ‘the business’ because it is essentially a job with minimal tax benefits.

To stick to the sports metaphor – not everyone needs to play a sport and not everyone needs to be a Champion. Even at the Olympics, there are THOUSANDS of competitors and only HUNDREDS of medalists.

Let’s face it, being a Champion, in business or sport is not “easy”, it takes time, money and effort.

You need to want it.

If you don’t want it, it’s OK, there is always someone there ready to take it.

Someone eager, hungry and ambitious.

So don’t sweat it if you’re not and don’t want to be a Champion.

Not everyone should be.

If you are or want to become a Champion in business, you’ll be interested in my recent blog posts below:

How to go from creating motivation to building momentum

Why smart business people fail

Why practice does not make perfect

Winners - LosersIf you think this blog post is an exercise in reverse psychology, it’s not. I fully and sincerely accept there are different kinds of people in the world and not everyone needs or should be motivated to succeed and excel.

First and foremost because, by definition – mathematically – it’s impossible for everyone to excel or “succeed”. The normal probability distribution curve has proven to be quite robust in almost all areas of endeavor… for a reason.

People are “normal” and as such most people produce at or near “average” results.

Why focus on this realisation that many would cite as self-evident?

BECAUSE it’s not that obvious. Too many wannabes and gonnabes are deluded into thinking they will be the next “millionaire” when the harsh reality is they have no such “chance”.

Creating that delusion, false expectation is simply not fair. It’s one of my pet peeves of this “industry”. I am all for adopting a Positive Mental Attitude, but not at the cost of self-delusional lunacy.

If you are a Champion, you know it. There is no need to convince you to become one. Even if you haven’t yet “won” the ultimate prize, you know it’s not a question of “if”, but rather “when”.

If you aren’t (yet) a Champion, but want to become one… I suggest you read the blog posts noted above as a starting point.

 

Act as the business you want to be

If you want the genesis of this concept, watch Steve Job’s Commencement Address To Stanford University Graduates in 2005 shown below.

Listen to one of our Platinum Program Members
who explains this philosophy in his own words:

When we started, we were aiming to assist smaller businesses, those with less
than 20 employees.  This is because 55% of all employment income in this
country is paid by those businesses.  The multinationals only provide 2%.

So wanting to help Australia be a more prosperous and competitive economy
meant helping those smaller businesses to really become successful,
particularly in export markets.

So we started as a small, lower cost base business able to serve smaller
clients cost effectively.  Since then I have grown less enamoured with this
position over time.  There is a reason companies remain small.  Sometimes it
is because that is what they want.  Less.  Less is easier and can involve
reduced risk, though not always.  But often it is because they don’t have
the mindset, skill or vision to be anything else.

It is clear that for us to grow, I have to have the resources to do more work
and the income to pay for those resources.  So our business model doesn’t
scale if we want to move up in size.  Particularly with the type of clients we
have generally been working with.

This year I’m thinking about how to take what we are doing and push it past
the $1,000,000 mark.  So what I’ve started doing is pricing our quotes as if
we already were that size.  Sometimes this means the price is double what it
might have previously been.  But I’m also looking at the delivery side and
making sure it also looks like it should for the size of business I want to
be.

And it is working!  We are changing.  We are looking at moving to commercial
premises before the end of the financial year.  A new class of clients are
being attracted to us (and us to them) because our value proposition makes
sense to them.  Some of these clients are larger than our previous target
companies.  Some are wanting to grow and know they need the right
partnerships to get there.  There is a long way to go yet but the progress
is encouraging.

So my distinction is a simple one.  Start acting like who and what you want
to be.  Don’t wait for the growth and then respond.  Change first.  Be the
catalyst yourself.  Make it happen first in you and then it will flow out to
the rest of the world.

Steve Jobs would be proud.